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By law, GAO annually assesses the Missile Defense Agency's (MDA) progress in developing and fielding a Ballistic Missile Defense System (BMDS). Funded at $8 billion to nearly $10 billion per year, it is the largest research and development program in the Department of Defense (DOD). The program has been managed in 2-year increments, known as blocks. Block 2006, the second BMDS block, was completed in December 2007. GAO assessed MDA's progress in (1) meeting Block 2006 goals for fielding assets, completing work within estimated cost, conducting tests, and demonstrating the performance of the overall system in the field, and (2) making managerial improvements to transparency, accountability, and oversight. In conducting the assessment, GAO reviewed the assets fielded; contractor cost, schedule, and performance; and tests completed during 2007. GAO also reviewed pertinent sections of the U.S. Code, acquisition policy, and the charter of a new missile defense board.

MDA made progress in developing and fielding the BMDS during Block 2006 but fell short of meeting its original goals. Specifically, it fielded additional assets such as land-based interceptors and sea-based missiles and upgraded other assets, including Aegis BMD-equipped ships. It also met most test objectives, with a number of successful tests conducted. As a result, fielded capability has increased. On the other hand, it is difficult to assess how well BMDS is progressing relative to the funds it has received because fewer assets were fielded than originally planned, the cost of the block increased by at least $1 billion, some flight tests were deferred, and the performance of the fielded system remains unverified. In particular, GAO could not determine the full cost of Block 2006 because MDA continued to defer budgeted work into the future, where it is no longer counted as a Block 2006 cost. Also making cost difficult to assess is a work planning method--referred to as level of effort--used by contractors that does not link time and money with what is produced. When not appropriately used, level-of-effort planning can obscure work accomplished, portending additional cost in the future. MDA is working to minimize the use of this planning method--a needed step as contractors overran their fiscal year 2007 budgets. Performance of the fielded system is as yet not verifiable because too few tests have been conducted to validate the models and simulations that predict BMDS performance. Moreover, the tests that are done do not provide enough information for DOD's independent test organization to fully assess the BMDS' suitability and effectiveness. GAO has previously reported that MDA has been given unprecedented funding and decision-making flexibility. While this flexibility has expedited BMDS fielding, it has also made MDA less accountable and transparent in its decisions than other major programs, making oversight more challenging. MDA, with direction from Congress, has taken several steps to address these concerns. MDA implemented a new way of defining blocks--its construct for developing and fielding BMDS increments--that should make costs more transparent. For example, under the newly-defined blocks, MDA will no longer defer work from one block to another. Accountability should also be improved as MDA will, for the first time, estimate unit costs for selected assets and report variances from those estimates. DOD also chartered a new board with more BMDS oversight responsibility than its predecessor, although it does not have approval authority for some key decisions made by MDA. Finally, MDA will begin buying certain assets with procurement funds like other programs. This will benefit transparency and accountability, because procurement funding generally requires that assets be fully paid for in the year they are bought. Previously, MDA, with Congressional authorization, was able to pay for assets incrementally over several years. Additional steps could be taken to further improve oversight. For example, MDA has not yet estimated the total cost of a block, and therefore, cannot have its costs independently verified--actions required of other programs to inform decisions about affordability and investment choices. However, MDA does plan to estimate block costs and have them verified at some future date.

Recommendations for Executive Action

Status: Closed - Not Implemented

Comments: The Missile Defense Agency (MDA) is in the process of transitioning to a new acquisition strategy. MDA has developed cost estimates for some of its technology programs, but has not baselined any of them at this time. MDA currently uses knowledge points to address technical maturity and affordability issues and does not plan to establish baselines for any of them.

Recommendation: To build on efforts to improve the transparency, accountability, and oversight of the missile defense program, the Secretary of Defense should direct MDA to investigate ways of developing a baseline or some other standard against which the progress of technology programs may be assessed.

Agency Affected: Department of Defense

Status: Closed - Implemented

Comments: The Missile Defense Agency has been working to minimize the amount of work categorized as level of effort. The agency plans to refine its earned value management guidance to include additional criteria for level of effort work.

Recommendation: To build on efforts to improve the transparency, accountability, and oversight of the missile defense program, the Secretary of Defense should direct MDA to examine a contractor's planning efforts when 20 percent or more of a contract's work is proposed as level of effort.

Agency Affected: Department of Defense

Status: Closed - Implemented

Comments: In its June 2010 Ballistic Missile Defense System (BMDS) Accountability Report, the Missile Defense Agency implemented this recommendation by clarifying the criteria that it will use for reporting unit cost variances for BMDS assets.

Recommendation: To build on efforts to improve the transparency, accountability, and oversight of the missile defense program, the Secretary of Defense should direct MDA to clarify the criteria that it will use for reporting unit cost variances to Congress.

Recommendation: To build on efforts to improve the transparency, accountability, and oversight of the missile defense program, the Secretary of Defense should direct MDA to develop a full cost for each block and request an independent verification of that cost.

Agency Affected: Department of Defense

Status: Closed - Not Implemented

Comments: MDA is currently coordinating with DOT&E on a revised test plan that may include operational assessments. The agency plans to field BMDS elements in coordination with the war fighters who participate in ground and flight tests to support capability activation. Although MDA will continue working closely with DOT&E and the operational test agencies in the Services to strengthen the testing of Ballistic Missile Defense System suitability and effectiveness, MDA does not currently consult with DOT&E to make fielding decisions.

Recommendation: To build on efforts to improve the transparency, accountability, and oversight of the missile defense program, the Secretary of Defense should direct MDA and the Director of Operational Test and Evaluation to agree on criteria and incorporate corresponding scope into developmental tests that will allow a determination of whether a block of BMDS capability is suitable and effective for fielding.